Question

Dimash Inc.is a recreational outfitterthatprovidesquality products based around fun and water. The Company is now considering expanding its offerings to include specialty touring kayaks. Kayak By Designconceptgrew out of inspirationand experienceof its resident sportsman and craftsman, Dimash Kudaibergen. Long before the paddle enters the water,each Kayak design begins with a pen stroke.With prototype in hand, the goal now is toopen a Kayak Design and Sales Centeron January1, 2021. To make the decision, Dimash planning grouprequires a master budget for the center’s first quarterof operation (i.e., January, February, Marchof 2021).

Requirements:Based on the following estimates, you are asked to construct athree-monthmaster budgetfor the months January, Februaryand March.

a.The Company ownerswill contribute $50,000 cash to get this center started.

b.Itscapital expenditures projection requirethat the Companypurchase $328,000 of equipment on January 2forthe new center. The equipment supplier allows a thirty-day trial period. The company expectspay for the equipment on or before January 31. The equipment is expected to have a 10-year useful life and a $28,000 salvage value.

c.Market research and various meetings with sales staff has produced the following sales projections:January1,000 kayaksFebruary1,500 kayaksMarch750 kayaksApril750 kayakEach Kayak is priced to sell at $950. 50% of the sales will be cash and 50% will be credit. Prepare a sales budget.

d.The company expects to collect 30% of accounts receivable in the month of sale and 70% of accounts receivable in the month following the sale. Prepare a schedule of expected cash receipts.

e.Use the information developed in requirements b and cabove to determine the amount of accounts receivable on the March31 pro forma balance sheet and the amount of sales on the first quarter pro forma income statement.

f.The company policy is to have finished goods ending inventory of Kayaks in a month equal to 20% of the next month’s anticipated sales. Prepare a production budget

g.Production of each kayak requires 54 pounds of polyethylene powder and a finishing kit (rope, seat, hardware, etc.). The companypolicy is that the ending inventory of polyethylene powder should be 25% of the amount needed for production in the next month. The finishing kits can be assembled as they are needed. The companyonlymaintainsa small inventory of the finishing kits, 10% of the number needed for production in the next month. The polyethylene powder used in these kayaks costs $1.75 per pound, and the finishing kits cost $190 each. Prepare a direct materials budget.

h.Materialsinventory purchases will all be on account. The company would pay 80% of accounts payable in the month of purchase. It will pay the remaining 20% in the following month. Prepare a schedule of expected cash payments for inventory purchases.

i.Production of a single kayak requires 2 hours of time by more skilled type I employee and 3 hours of finishing time by less skilled type II employees. Type I employees are paid $22per hour, and type II employees are paid $14per hour. Prepare a labor budget.100% of direct labor is paid in the month incurred.

j.Manufacturing overhead is assigned at 150% of labor costs. Depreciation on equipment is included in the assigned overhead (i.e., covered by the 150% rate). Prepare a manufacturing overhead budget.Manufacturing overhead, except depreciation, is paid in themonth incurred.

k.Use the information developed in requirementsaboveto determine Cost per Kayakand thetotalamount of cost of goods sold on the first quarterpro forma income statement and the amounts of ending inventory and accounts payable on the March 31pro forma balance sheet.

l.Budgeted monthly selling and administrative expenses are:Variable Costper unit sold* $45 Fixed Cost Salary Expense 20,000 Rent 4,500 Utilities1,400Miscellaneous1,350 Insurance500 * Variable cost of $45 includes sales commission of $15 per unit sold.Prepare a selling and administrative expense budget.

m.Sales commission and utilities are paid in the month afterthe month in which they are incurred. All other expenses are paid in the month in which they are incurred. Prepare a schedule of cash payments for selling and administrative expenses.

n.The company is subject to 20% income tax.

o.Use the information developed in requirements aboveto determine the amount of sales commissions payable, utilities payable, and accumulated depreciation on the March31 pro forma balance sheet and the amount of selling andadministrative expense on the first quarter pro forma income statement.

p.Using a line of credit, the companyborrows and repays principal in increments of $1,000 on the last day of the month as needed. It pays interest of 0.5percent(i.e. half of 1%))per month in cash on the last day of the month. Company policy is to maintain an ending cash balance of at least $20,000. Use this and other information developed inrequirements aboveto prepare a cash budget.

q.Use the information developed aboveto determine the cash flows from operating, investing, and financing activities on the first quarterpro forma Statement of Cash Flows(SCF), the interest expense on the first quarterpro forma Income Statement(I/S)andthe amount of the ending cash balance and the line of credit liability on the March31pro forma Balance Sheet(B/S).Prepare these documents (SCF, I/S, B/S) in good for

I only need M-Q, i figured youd need the rest tho.Thank you!

Answer 1

Note: All Monitory Figures in ($)

Solution

1. Calculation of Annual Depriciation

             Total Capital Expenditure = 328000

Less: Salvage Value                   =   28000

Depriciable Value                         = 300000

Nos of Useful Years                    = 10

Depriciation Per Annum              = 30000.

2. Sale Budget:

Particulars	Jan	Feb	Mar
Nos Of Kayak to be sold	1000	1500	750
Sale Price per Kayak	950	950	950
Total Budgeted Sale	950000	1425000	712500
Cash Sale (50%)	475000	712500	356250
Credit Sale (50%)	475000	712500	356250

3. Expected Cash Receipts.

Particulars	Jan	Feb	Mar
Cash Sale	475000	712500	356250
Receivables (30%)	142500	213750	106875
Receivables (70%) of Previous Month		332500	498750
Total Expected Cash Receipts	617500	1258750	961875

4. Calculation of Accounts Receivables & Sale Amount for the Quarter.

Particulars	Amount
Total Sale	3087500
Less: Cash Sale	1543750
Less: Recoverd from Debtors till March	831250
Accounts Receivable as on 31st March-2021	712500

5. Production Budget (in Units)

Particulars	Jan	Feb	Mar
Expected Sale Units	1000	1500	750
Add: Required Closing Stock	300	150	150
Less: Opening Stock		300	150
Budgeted Production (Units)	1300	1350	750

6. Direct Material Budget

Particulars	Jan	Feb	Mar
Expected Production (Note-5)	1300	1350	750
Polythelene Powder (54 Pound Per Unit)	70200	72900	40500
Finishing Kit	1300	1350	750
Add: Closing Stock
Polythelene Powder (25%) Next Month Prod.	18225	10125	10125
Finishing Kit (10%) Next Month Prod.	135	75	75
Less Opening Stock
Polythelene Powder		18225	10125
Finishing Kit		135	75
Budgeted Direct Material
Polythelene Powder @ 1.75 per Pound	88425	64800	40500
Finishing Kit @ 190 Per Unit	1435	1290	750
Polythelene Powder (In Amount)	154743.75	113400	70875
Finishing Kit (In Amount)	272650	245100	142500
Total Amount	427393.75	358500	213375

7. Expected Cash Payments.

Particulars	Jan	Feb	Mar
Amount Of Purchase (Point-6)	427393.75	358500	213375
Cash Paid during Month (80%)	341915	286800	170700
Cash Paid Next Month (20%)		85478.75	71700
Expected Cash Payment	769308.75	730778.75	455775